Cocoa Awaits Breakout After Early March Rally

In today’s technical analysis, let’s take a look at Cocoa, which recently showed signs of a potential trend reversal.

At the end of February, the market formed an inverse head and shoulders pattern marked with blue rectangles. The breakout above the black neckline activated this formation and generated a buy signal, suggesting that the previous downtrend could be coming to an end.

The first days of March confirmed this scenario, with price moving decisively higher. However, since March 12th, momentum has weakened and the market has entered a corrective phase.

This correction is currently taking the shape of a wedge pattern marked with green lines. From a technical perspective, this is typically considered a continuation formation, meaning it often resolves in the direction of the preceding trend, which in this case is upward.

As long as the price remains inside the wedge, we are still in a consolidation phase. The key will be the breakout. A move above the upper boundary of the wedge would confirm continuation of the bullish trend and generate a proper buy signal.

On the other hand, a breakout to the downside would invalidate the bullish scenario and cancel the positive sentiment created by the earlier reversal pattern.

For now, cocoa remains in a corrective structure after a strong bullish signal. The next breakout will determine whether the uptrend continues or fails.

Source: https://www.axiory.com/analytics/technical-analysis/cocoa-awaits-breakout-after-early-march-rally